Air India sale: Govt clarifies rules, sets 31 May as new deadline for bids

Mumbai: The government on Tuesday extended the privatization process of Air India by a fortnight and clarified various knotty issues identified by potential bidders.

Expressions of interest (EoIs) for the state-owned airline will now be accepted till 31 May, against the previous deadline of 14 May, and qualified bidders will be announced on 15 June, against the previous date of 28 May, a corrigendum to the EoI document said.

In a separate document which answers several questions raised by potential bidders, the government said there is no reference in the preliminary information memorandum (PIM) that the winner must mandatorily take the company public within three years. Also, individuals, other than the airline’s employees, will not be allowed to submit bids.

The 19-page document answers questions related to airport slots, bilateral rights and employee rights.

The government plans to sell 76% in the airline along with management control. However, the government will have rights similar to that of a minority investor as per the Companies Act and Shareholder’s Agreement, the draft for which will be provided to bidders at the Request for Proposal (RFP) stage. In other words, the government will have no special rights in the airline despite retaining a 24% stake.

Details about safeguarding employees’ interests, call option to buy the government’s stake, renewal of existing slots and bilateral flying rights, new terms for interest-bearing debt and fund raising will be provided during the RFP stage, the government said. Concerns raised by the airline’s unions and employees are being suitably addressed, it added.

Of the 160 queries received, over 50 will be provided during the RFP stage, the government said.

The government also said the sovereign guarantees enjoyed by the national carrier will cease to exist after the privatization. It’s up to the winner to decide what to do with Air India’s planes grounded for various reasons, it said.

A person aware of the development said the matter of conducting an IPO was just a rumour. This person said the government has no problem if an existing airline buys Air India and operates both airlines in a synergistic manner.

On 28 March, the government issued the PIM for the proposed divestment. However, major airlines such as IndiGo, Jet Airways, Emirates and Qatar Airways decided not to join the race. The Tata group, long considered a potential suitor, is also unlikely to bid, a Reuters report dated 11 April said. The report attributed the group’s unwillingness to the terms and conditions of the sale, which it considered “just too onerous”.

The problem, according to experts, lies with the government’s plan to sell 76% stake in Air India along with 100% stake in low-cost international carrier Air India Express Ltd and 50% in Air India SATS Airport Services Pvt. Ltd, a joint venture services company, and not to sell individual arms or operations of the airline separately.

“Contrary to recent reports, there’s quite a fair amount of interest in Air India from several parties,” said the person quoted above, who didn’t want to be identified.

“Getting 160 queries from potential bidders clearly shows that parties are interested in Air India,” the person added.